Withdrawal and Adjustment of Suits

Clause (b) is wider and correspondingly discretionary, and it is not a licence to have another go: the court has to be satisfied there are sufficient grounds.

Rule 1(5) protects co-plaintiffs: nothing in the rule authorises the Court to permit one of several plaintiffs to abandon or withdraw without the consent of the other plaintiffs.

Rule 1A deals with what happens to a defendant left behind. Where a suit is withdrawn or abandoned and a defendant applies to be transposed as a plaintiff under Order I Rule 10, the Court shall have due regard to the question whether he has a substantial question to be decided against any other defendant.

Rule 2 is the limitation warning, and students miss it constantly: in any fresh suit instituted on permission granted under Rule 1, the plaintiff shall be bound by the law of limitation in the same manner as if the first suit had not been instituted. So permission preserves the right to sue; it does not stop the clock. A plaintiff who withdraws with liberty after three years may find the fresh suit time barred anyway.

Compromise: Rule 3

Rule 3 provides that where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties, or where the defendant satisfies the plaintiff in respect of the whole or any part of the subject matter, the Court shall order the agreement, compromise or satisfaction to be recorded and shall pass a decree in accordance with it, so far as it relates to the parties to the suit, whether or not the subject matter of the agreement is the same as the subject matter of the suit.

Several points repay attention.

"In writing and signed by the parties" was added by amendment, and it is now a condition. An oral compromise is not enough.

"Lawful" is defined negatively by the Explanation: an agreement or compromise which is void or voidable under the Indian Contract Act 1872 shall not be deemed lawful within the rule.

Where the compromise is disputed, the proviso requires the Court to decide the question, and expressly forbids an adjournment for that purpose unless the Court records reasons for granting one.

The decree may go beyond the suit. The words allow a decree in accordance with the compromise even where the compromise covers matters outside the subject matter of the suit, so long as it relates to the parties. That is why parties settling several disputes at once can record the whole settlement.

Rule 3A bars a separate suit: no suit shall lie to set aside a decree on the ground that the compromise on which the decree is based was not lawful. The challenge must be made in the same suit, before the same court, under the proviso to Rule 3.

The res judicata consequence sits in [Res Judicata]: because the court in a compromise decree decides nothing and merely records what the parties agreed, such a decree does not operate as res judicata, though it binds by estoppel.

A worked example

Eshan sues Farida for possession of a godown. Half way through, he realises his plaint described the property by the wrong survey number and that the suit is bound to fail as framed.

If he simply withdraws. Rule 1(1) allows it at any time, but Rule 1(4) makes him liable for costs and precludes a fresh suit on the same subject matter. His mistake would cost him the claim entirely.

If he applies under Rule 1(3)(a). A wrong description of the property is a formal defect, so the Court may permit withdrawal with liberty to institute a fresh suit, on such terms as it thinks fit, usually costs.

He obtains that liberty and sues again two years later. Rule 2 applies: he is bound by the law of limitation as if the first suit had never been instituted. The years spent on the first suit do not help him.

Change the facts. Suppose Eshan simply thinks his evidence is weak and wants to gather more. That is not a formal defect, so clause (a) is unavailable, and he would have to persuade the court of sufficient grounds under clause (b), which is discretionary and by no means automatic.

Suppose Eshan is a minor suing through his father. The proviso to Rule 1(1) applies: no abandonment without the leave of the Court, supported by his next friend's affidavit and, where he has a pleader, the pleader's certificate that the abandonment is for the minor's benefit.

Suppose instead the parties settle, and record the settlement in a signed written agreement covering both the godown and an unrelated loan. Rule 3 lets the Court record it and pass a decree in accordance with it, even as to the loan, because it relates to the parties, although it was never the subject matter of the suit.

Farida later says the settlement was obtained by coercion. Coercion makes an agreement voidable under the Contract Act, and by the Explanation such an agreement is not lawful within Rule 3. But she cannot bring a separate suit to set the decree aside: Rule 3A bars it. She must raise it in the same suit, and the proviso to Rule 3 requires the Court to decide the question without an adjournment unless it records reasons.

What it does not mean

Withdrawal is not free. Without permission it costs the plaintiff the claim, under Rule 1(4).

A formal defect is not a weak case. It is a defect of form, in the frame of the suit, verification, valuation, parties or description.

Permission to sue afresh does not stop limitation. Rule 2 puts the plaintiff in the position he would be in if the first suit had never been filed.

One of several plaintiffs cannot withdraw alone. Rule 1(5) requires the consent of the others.

An oral compromise will not do. Rule 3 requires an agreement in writing and signed by the parties.

A compromise decree cannot be attacked by a separate suit. Rule 3A bars it; the challenge belongs in the same suit.

Quick revision

Order XXIII Rule 1(1): the plaintiff may abandon the suit or part of the claim at any time after institution. Proviso: not where he is a minor or under Order XXXII, without the leave of the Court, supported by the next friend's affidavit and the pleader's certificate.

Rule 1(4): abandonment, or withdrawal without permission, means costs and no fresh suit on that subject matter.

Rule 1(3): permission to withdraw with liberty to sue afresh only where the suit must fail by reason of some formal defect, or there are sufficient grounds for allowing a fresh suit.

Rule 1(5): one of several plaintiffs cannot withdraw without the others' consent. Rule 1A: a defendant may apply to be transposed as plaintiff.

Rule 2: a fresh suit is bound by limitation as if the first suit had never been instituted.

Rule 3: a compromise must be lawful, in writing, and signed by the parties, or the defendant must have satisfied the plaintiff; the Court records it and passes a decree accordingly, even as to matters outside the subject matter, so long as they relate to the parties. Explanation: void or voidable under the Contract Act is not lawful. Proviso: a disputed compromise is decided by the Court, without adjournment unless reasons are recorded.

Rule 3A: no separate suit to set aside a decree on the ground that the compromise was not lawful.

Test yourself

1. May a plaintiff withdraw his suit, and at what cost? Yes. Under Order XXIII Rule 1(1) he may abandon the suit or part of his claim at any time after institution. But under Rule 1(4), where he does so without the permission referred to in Rule 1(3), he is liable for such costs as the Court awards and is precluded from instituting any fresh suit in respect of that subject matter.

2. On what grounds may the Court permit withdrawal with liberty to sue afresh? Only two, under Rule 1(3): where the Court is satisfied that the suit must fail by reason of some formal defect, or that there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject matter of the suit or part of the claim.

3. What is a formal defect? A defect of form rather than of substance, such as a defect in the frame of the suit, in verification, in valuation, in the joinder of parties or in the description of the property. A weakness in the plaintiff's evidence or in the merits of his case is not a formal defect.

4. Does permission to sue afresh protect the plaintiff on limitation? No. Order XXIII Rule 2 provides that in any fresh suit instituted on such permission, the plaintiff is bound by the law of limitation in the same manner as if the first suit had not been instituted.

5. What are the requirements of a valid compromise under Rule 3? The suit must be shown to have been adjusted wholly or in part by a lawful agreement or compromise in writing and signed by the parties, or the defendant must have satisfied the plaintiff in respect of the whole or part of the subject matter. An agreement void or voidable under the Indian Contract Act is not lawful for this purpose.

6. Can a party file a separate suit to set aside a compromise decree on the ground that the compromise was unlawful? No. Order XXIII Rule 3A bars such a suit. The objection must be raised in the same suit, where the proviso to Rule 3 requires the Court to decide the question, granting no adjournment for the purpose unless it records its reasons.